GST registration cancellation should be retrospective only from the date no business is conducted

Varyam Dass Khurana Vs. Commissioner of GST (Delhi High Court)

The Hon’ble Delhi High Court in Varyam Dass Khurana vs. Commissioner of GST, New Delhi [W.P.(C) NO. 15670 OF 2023 dated December 05, 2023], directed that, the registration has to be cancelled retrospectively from the date when no business is being conducted by the Registered Person. This article provides an in-depth analysis of the court’s decision and its implications on retrospective cancellations.

Facts: Varyam Dass Khurana was a registered person under GST who is engaged in the business of supplying building materials and other related materials, operating under the business name and style of Ram Builders, having its principal place of business in Delhi. However, Varyam Dass Khurana died and one of the sons namely Shri Sanjay Khurana took charge of the business and applied for cancellation of GST Registration in favour of Varyam Dass Khurana. However, the Revenue Department (“the Respondent”) issued notice seeking further information pertaining to the application filed.

The Respondent vide order dated May 29, 2020 (“the Impugned Order”), pursuant to the Show Cause Notice dated May 18, 2020 (“the SCN”) cancelled the GST Registration retrospectively.

Aggrieved by the Impugned Order, Shri Sandeep Khurana (“the Petitioner”) being one of the legal heirs filed a writ petition before the Hon’ble Delhi High Court.

Held: The Hon’ble Delhi High Court in W.P.(C) NO. 15670 OF 2023 directed the Respondent that the Impugned Order shall take effect from the date of issuance of SCN as no business was being conducted thereafter, after taking into consideration the fact that the Impugned Order is devoid of any reasoning.

Conclusion: The Delhi High Court’s ruling in the Varyam Dass Khurana case clarifies that GST registration cancellation should be retrospective only from the date when no business is conducted. The lack of reasons in the cancellation order led to the court directing a specific effective date. This judgment provides guidance on the appropriate retrospective application of GST registration cancellations, offering relief to businesses and heirs facing such issues. Businesses should be aware of the implications highlighted in this case, ensuring compliance with the specified effective date in cancellations.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. Issue notice.

2. Mr. Rajeev Aggarwal, learned Additional Standing Counsel appearing for respondents, accepts notice.

3. The present petition has been filed by Shri Sandeep Kumar Khurana, son of late Shri Varyam Dass Khurana, who was registered with the GST authorities.

4. The petitioner impugns an order dated 29.05.2020 (hereafter ‘impugned order’), whereby the GST registration of Shri Varyam Dass Khurana was cancelled, albeit with retrospective effect.

5. The petitioner states that late Shri Varyam Dass Khurana was engaged in supplying building material cement, dust, bricks etc. from his principal place of business located at H. No. 28, Main Road, Opp. Radhu Cinema, Naveen Shahdara, North East Delhi, Delhi-110032. It is stated that late Shri Varyam Dass Khurana was regularly filing his returns, and had properly claimed Input Tax Credit.

6. Shri Varyam Dass Khurana expired on 02.01.2019 and one of his sons Shri Sanjay Khurana took charge of the business. It is stated that he also regularly filed the GST returns. It is further stated that Shri Sanjay Khurana applied for cancellation of the GST registration in favour of late Shri Varyam Dass Khurana on 17.02.2020. The said application was acknowledged. Thereafter, the respondent issued a notice seeking further information regarding the said application.

7. Although, it is averred in the present petition that the petitioner (Sandeep Kumar Khurana) had appeared before the concerned authorities, the said contention is incorrect because a lockdown was imposed during that period and, therefore, no personal hearings were conducted.

8. It is stated that Shri Sanjay Khurana (son of the deceased Shri Varyam Dass Khurana) could not pursue the matter and he also expired on 28.04.2021.

9. Thereafter, the respondents issued the impugned order cancelling the registration, granted to Late Shri V.D. Khurana in respect of his proprietorship concern, Ram Builders. This was pursuant to the Show Cause Notice dated 18.05.2020. The impugned order does not indicate any reasons for cancelling the registration. However, it cancels late Shri Khurana’s GST registration with retrospective effect from 04.07.2017.

10. It is apparent that the said impugned order, which is bereft of any reasons, cannot be sustained. However, the petitioner is not aggrieved by the cancellation of late Shri Khurana’s registration, as according to him the business was closed down. He is aggrieved by the cancellation to the extent that it is effected retrospectively, from the date the registration was granted.

11. In view of the above, we consider it apposite to direct that the order cancelling the registration shall take effect from 18.05.2020, the date of the Show-Cause notice. This is because it is the petitioner’s case that no business was conducted thereafter.

12. It is clarified that this order shall not preclude the respondents from initiating any proceedings for recovery of tax, if any, is due and payable or taking steps for any statutory violation, if any such violation is found, in accordance with law.

13. It is also clarified that nothing stated in this order shall be construed as an expression of opinion as to whether the petitioner is in fact the legal heir or has any right, title or interest in the business of late Varyam Dass Khurana.

14. The petition is disposed of in the aforesaid terms.

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